Considering doing a MTR and need advice

Lender · Member since 2026 · 18 posts · 16 votes

6mo

This is a classic 'MTR pivot' dilemma. While the 5% appreciation in a B-class area is great for the long term, your immediate concern should be the upfront 'friction' costs and your exit strategy.

As an investor and lender, here is how I would stress-test this deal:

1. The Fees: Are they reasonable?

The 20% Management Fee: This is on the high end for an MTR (usually 12–15%), but if they are truly handling 'hospitality' (linens, professional cleaning coordination, mid-stay inspections), it can be justified.
The $6k Setup Fee: This is the red flag. Between the $6k service fee and the $10k furniture budget, you are $16k 'in the hole' before Day 1. If the MTR market doesn't materialize, that $16k is a sunk cost that you cannot recover in an LTR pivot.

2. The 'Lender’s Perspective' on Cash Flow You mentioned that as an LTR, you’d 'barely break even.' In the lending world, we look at the DSCR (Debt Service Coverage Ratio). If your LTR rent doesn't cover 1.2x the mortgage, taxes, and insurance, most DSCR lenders will see this as a high-risk asset.

The MTR Trap: MTR income is great, but many lenders will still underwrite your 'exit' or refinance based on Long-Term Rental market rates (using a Form 1007 appraisal). If the LTR math doesn't work, you might find yourself 'stuck' in a high-interest bridge loan or unable to pull your $16k setup costs back out.

3. Verify the Demand (Don't take the PM's word) Before cutting a $6k check, do your own due diligence:

Check the 'Hospitals & Corporate Hubs': MTRs thrive on traveling nurses and displaced homeowners (insurance claims). Call the housing coordinator at the nearest hospital or a relocation agency like CHPA (Corporate Housing Providers Association). Ask them if they have a shortage of 3-bedroom units in that zip code.
Run a 'B-Class' Reality Check: 3-bedroom MTRs are often harder to fill than 1-2 bedrooms. 3-beds are usually for families displaced by fire/flood. Is the PM experienced in insurance housing, or just hoping for 'digital nomads'?

My Advice: If the LTR math doesn't work as a 'Plan B,' this isn't an investment; it's a gamble on a specific manager's ability to find a niche tenant.

I'd be happy to run a 'Stress Test' for you—showing what your DSCR looks like at LTR rates vs. MTR rates—so you can see exactly how much 'cushion' you really have after that 20% management fee!

4 Reply

David LeichterPro Member
OP
Member since 2025 · 14 posts · 9 votes
5mo
@Hazel Wilder thanks! Are you a lender?
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Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 942 votes

6mo

Quote from @David Leichter:

I am contemplating investing in an out-of-state MTR and I have a ton of questions surrounding whether it's a good idea or not. The property is fairly new (built in 1990) and in a solid B area, where appreciation has been a modest but consistent 5% per year over the last 10 years. This particular area does not have too many MTRs, though. The property manager said that she thinks there is a market for MTR rentals in this area, and she's gotten a lot of calls requesting it. She said she charges 20% monthly management fee for her MTRs, as well as $6,000 initially (that includes designing, shopping, setting up, and everything involved- whether that is putting furniture together or hiring help to do that, etc.). Furnishings can also cost between $7K-$10K for this 3 bedroom house.

If this house/area does not end up working out as a MTR, I'd probably pivot to a LTR, in which case i'd barely break even (if that) every month.

I'm struggling to figure out A) are her rates and charges reasonable and ordinary for this kind of rental, B) whether this makes sense, or even how I should be thinking about this. Never done a MTR before; my other rentals are all traditional LTRs.

Any help/guidance would be appreciated!!!

Sounds like you’re really digging into the numbers, which is great. For a first MTR, those setup and management fees aren’t unusual. MTRs do have higher upfront and ongoing costs than a traditional LTR, but the real key is whether the cash flow and occupancy justify it. If you’re not confident the market can consistently support the rent, it might make sense to pivot to a market where long-term rentals or Section 8 properties cash flow more predictably, like the Midwest cities. Those markets offer undervalued, off-market deals with strong tenant demand, and you can have a full team handling property management, rehab, and lenders, even from out-of-state, which removes a lot of the guesswork.

[email protected]614-418-6081

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Richard F.

Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes

6mo

I would take a hard look at your "fairly new" assessment. At 36 years old, the actual condition will vary a great deal depending on the quality and type of original materials, products, and installation processes used, as well as whether or not a regular Preventative Maintenance Program was followed, or if it has just been milked of cash for those years.

What exactly does the 20% Management fee provide, and does she have, or does the State require, a Real Estate License? What is the cost and time frame of an eviction? What is are the screening criteria?

$6K to design, shop, and set up? What is the monthly rate tier? This seems pretty excessive for temporary semi-professional clientele. Providing furnishings, and, I assume some level of housewares and linens, is another maintenance issue to deal with at turnover. You can't expect to attract desirable Tenants if there are burn marks, stains, or tears in upholstered or other items. If it doesn't work out, you will have a bunch of "used" furniture to sell off, maybe 10 cents on the dollar. If you DO move forward, see if there is a used Hotel furniture outlet, as their old furniture is generally far more durable and attractive than common new furniture. You definitely do NOT want to leave any furniture in the unit if you change to LTR. It makes it far too easy for Tenants to leave under cover of darkness when all they need is a couple suitcases. You want LTR Tenants to have skin in the game, with a house full of furniture and knick knacks, and the time, effort, and cost of moving it all. Anyone that brings nothing, will never be a long term, Good Tenant.

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Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

6mo

@David Leichter Is the PM involved in the sale? For me that would put this into question. They haven't got anything to loose if you loose and a lot to gain by the sale and setup. Yes, they lose some good will but you are out of state so perhaps not as damaging to their reputation if it goes wrong. Try some other PMs in the area for their view on MTR of this size. For health care workers smaller units are better. This would be more if this is a big relocation area or attractive for insurance placements.

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Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

5mo

@David Leichter

I run a couple MTR’s. First I would search demand in the area. Hospitals, construction activity, close to downtown for business travelers, etc.

Check out the competition on sites like Furnished Finder and Airbnb for stays over 30 days. Look how they are furnished, rental amounts and if their calendar is booked.

As far as management, 20% is high for MTR. That is a rate for STR which requires much more work.

Depending on your level of furniture, I usually spend $10-$12 a square foot. This greatly depends on your level of design. I always want to outdo my competition, but of course your market is dependent on this.

I self manage which does require more work, but in general you only need 2-4 tenants a year. There has been a bigger trend for furnished LTR’s. You should investigate your area.

Reach out if you need help.

1 Reply

Taylor Arbaugh

Real Estate Agent · Columbus, OH · Member since 2025 · 7 posts · 5 votes

5mo

Quote from @David Leichter:

I am contemplating investing in an out-of-state MTR and I have a ton of questions surrounding whether it's a good idea or not. The property is fairly new (built in 1990) and in a solid B area, where appreciation has been a modest but consistent 5% per year over the last 10 years. This particular area does not have too many MTRs, though. The property manager said that she thinks there is a market for MTR rentals in this area, and she's gotten a lot of calls requesting it. She said she charges 20% monthly management fee for her MTRs, as well as $6,000 initially (that includes designing, shopping, setting up, and everything involved- whether that is putting furniture together or hiring help to do that, etc.). Furnishings can also cost between $7K-$10K for this 3 bedroom house.

If this house/area does not end up working out as a MTR, I'd probably pivot to a LTR, in which case i'd barely break even (if that) every month.

I'm struggling to figure out A) are her rates and charges reasonable and ordinary for this kind of rental, B) whether this makes sense, or even how I should be thinking about this. Never done a MTR before; my other rentals are all traditional LTRs.

Any help/guidance would be appreciated!!!

A) Are her fees reasonable?

20% management It’s much more hands-on than LTR
$6K setup/design fee is also reasonable if it truly includes full project management (design, sourcing, install, coordination)
$7K–$10K furnishing for a 3-bed actually feels low to me

For reference, we average about $16/sq ft to furnish and take a “buy once, cry once” approach. Cheap furniture gets destroyed fast in rentals, which kills your returns long term. Our management fee is 18% on MTR.

B) How to think about the deal

Don’t look at this as: Will I make more than LTR?

Look at it as: Am I creating a more controlled, higher performing asset?

Key differences vs LTR:

Control
With LTR… are tenants changing furnace filters? Reporting issues early?
With MTR, we have:
- Monthly professional cleans (paid by guest)
- Quarterly maintenance checks
- 2x/year 150-point safety inspections
- Even roof/gutter checks via drone
Wear and tear
Long-term tenants are often harder on properties than people think
MTR guests tend to be:
- Employer-paid
- Higher income
- Shorter stays → less accumulated damage than LTR
Revenue + flexibility
- Higher rent potential
- Ability to adjust pricing every 1–3 months
- Pivot options

Biggest risk in your deal

This is the part to focus on:

That can mean one of two things:

Opportunity (demand exists, supply hasn’t caught up)
Warning sign (demand isn’t actually there)

Your PM saying she’s getting calls is a good signal, but I’d want to validate:

What types of tenants are calling? (medical, corporate, insurance, etc.)
How many actual placements vs just inquiries?
Where are those people staying now?
What are they currently paying?

What makes this work (or not)

MTR success almost always ties back to repeatable demand drivers, like:

Hospitals
Large employers / relocations
Insurance displacement
Major construction / infrastructure

If those exist → strong play
If not → you’re guessing

Final thought

The fact that you can pivot to LTR and break even is actually a good safety net.

So the real question becomes:

Do you believe there is consistent 30–120 day demand in that specific pocket?
And do you trust the operator to actually capture it?

0 Reply

Allen DuanPro Member

Property Manager · Los Angeles, CA · Member since 2022 · 590 posts · 463 votes

5mo

Hey David, I own an MTR property management company. We charge 15 to 20% for full-service management. You should confirm that your PM specializes in MTRs and that they're not just an LTR manager trying to get more business. The single most important skill set for an MTR manager is knowing how to get good MTR bookings.

$6,000 for a design job is a bit high in my opinion, but it can make sense if you're hiring an experienced interior designer. Since your property manager is charging that amount, I think it's overpriced. It's unlikely a property management company is also a great MTR designer. 7 to 10K for a three-bedroom house is reasonable for all furnishing, household items, decor.

The question of whether this makes sense for you really comes down to your goals. How much more do you expect to make with the property as an MTR versus an LTR, and are you willing to put capital down up front to make that additional cash flow? Are there other benefits of MTRs besides the additional income that are valuable for you? For example, you'll be able to do cleaning and maintenance regularly to take care of the property. You're not restricted by rent increase caps in the same way as with an LTR.

0 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

5mo

Quote from @David Leichter:

I am contemplating investing in an out-of-state MTR and I have a ton of questions surrounding whether it's a good idea or not. The property is fairly new (built in 1990) and in a solid B area, where appreciation has been a modest but consistent 5% per year over the last 10 years. This particular area does not have too many MTRs, though. The property manager said that she thinks there is a market for MTR rentals in this area, and she's gotten a lot of calls requesting it. She said she charges 20% monthly management fee for her MTRs, as well as $6,000 initially (that includes designing, shopping, setting up, and everything involved- whether that is putting furniture together or hiring help to do that, etc.). Furnishings can also cost between $7K-$10K for this 3 bedroom house.

If this house/area does not end up working out as a MTR, I'd probably pivot to a LTR, in which case i'd barely break even (if that) every month.

I'm struggling to figure out A) are her rates and charges reasonable and ordinary for this kind of rental, B) whether this makes sense, or even how I should be thinking about this. Never done a MTR before; my other rentals are all traditional LTRs.

Any help/guidance would be appreciated!!!

I'd be VERY careful about trusting a PMC's opinion about an MTR market!

We're pretty transparent and while we really know our LTR markets, we proceed cautiously with MTR (we don't do STR).

When we price an LTR, we share our comparables and reasoning with our owner clients, so they can understand as much, or as little, as they want and discuss with us.

Providing that same level of info to an owner for an MTR is much more nuanced.

Recommend requesting all the info this PMC has to support what they are telling you!

Also, for the $6k Staging Fee, how will they be sourcing furnishings? It's pretty easy to order everything brand new online. For that amount of money, would expect they pursue as much used furniture and dining place settings as possible. Linens, towels, silverware can be bought new.

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Considering doing a MTR and need advice

Considering doing a MTR and need advice

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